The Government's bailing out on Serco's contract to run the troubled Mt Eden prison, but says it's still committed to private operators managing New Zealand prisons.
The move follows allegations of fight clubs and contraband and Serco being fined more than a million dollars for poor performance.
The Government’s now playing its get out of jail free card – exercising a break clause that allows it to end Serco's 10-year contract early.
Corrections Minister Sam Lotu-Iiga saying the department is "exercising its right not to renew the contract".
Corrections had been forced to take control of the prison and launch a full investigation into the incidents; that report is tied up in legal action.
But Serco's not being dumped because of any of that - inmate numbers are at record highs, the Corrections boss Ray Smith says, and the jail environment's changed since Serco signed on.
"What we need here is a fresh start," he says.
Labour's Kelvin Davis has called the decision humiliating.
"Obviously they are trying to find excuses for why they have failed abysmally, that's the bottom line – it's just a failure."
In quitting the contract, Corrections also revealed Serco has failed to maximise its annual performance bonuses.
"My assessment of that is that most of that won't be earned," says Mr Smith.
Serco will also be billed for the time Corrections is in control of Mt Eden.
"We aren't going to be walking out of there any time soon," Mr Smith says.
Serco wouldn't appear on camera but says it agrees with the decision and has no plans to fight it.
It doesn't officially exit the prison until 2017, and it keeps its the multi-million dollar contract to run Auckland South Corrections Facility in south Auckland.
"Wiri, I have been reassured is running well it is running effectively," Mr Lotu-Iiga says.
The Government is still leaving the door open to other private operators at Mt Eden prison, but exactly who will be something for the Cabinet and new Corrections Minister Judith Collins to consider next year.
Mr Lotu-Iiga doesn't think his handling of Serco has cost him his job.
Either way, with today's announcement the outgoing Corrections Minister has taken Serco down with him.
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